Support

A cookie is a piece of data stored by your browser or device that helps websites like this one recognize return visitors. We use cookies to give you the best experience on BNA.com. Some cookies are also necessary for the technical operation of our website. If you continue browsing, you agree to this site’s use of cookies.

Battle Lines Drawn Over Extending Energy Tax Credits

These groups say they want tax credits for commercial and residential small wind turbines,
geothermal energy pumps, fuel cell properties and combined heat and power systems
to be extended by Congress, and there could be negative impacts on businesses, manufacturing
and consumers if they aren’t extended.

These four energy tax credits, valued at $1.4 billion if they were extended until
2019, are among the nearly 40 tax credits set to expire on Dec. 31. Many are related
to non-energy industries.

The most likely vehicle for extension would be a year-end spending bill, but questions
remain about whether enough support exists to include them.

However, Rep. Kevin Brady (R-Texas), chairman of the House Ways and Means Committee,
told reporters Nov. 15 that tax extenders should be dealt with as part of overall
tax reform in 2017, Bloomberg News reported.

Lloyd Ritter, federal policy director for the Distributed Wind Energy Association,
which represents more than 100 small companies, from manufacturers to installers of
small wind turbines, said jobs and manufacturing will be badly hurt if these credits
expire because the technologies are still relatively new and need federal tax support.

“There’s no question that without a fair, level playing field in the tax arena, these
small businesses in rural America are going to suffer,” Ritter told Bloomberg BNA.

Conservative tax group opposition is growing, including from Americans for Prosperity
and Citizens Against Government Waste. They have come out against the one-off tax
credits for these energy technologies, saying they prefer broader tax reform rather
than tax laws for special interests in the renewable energy industry.

These two groups joined 45 other fiscally conservative organizations in sending a
letter in October to House and Senate leaders calling on them to oppose extending these
tax credits in a year-end funding bill.

Kevin Book, managing director at the energy analysis firm ClearView Energy Partners
LLC, said he expects that there may more support for these tax credits in the lame
duck session in Congress because spending on renewables is likely to fall under the
Trump administration.

“The incoming Trump administration probably won’t look for an early giveaway to renewables.
So there’s an incentive for some of the members who want those extenders passed, to
get them passed before the end of the lame duck,” he told Bloomberg BNA.

Conservative Call for Tax Reform

The four tax credits, often called the “orphan tax credits,” were left out of the
end-of-year funding bill in 2015. Last year’s bill did extend the investment tax credits
in a phased-down timeline for wind projects (through 2019), and phased-down timeline
for solar projects (through 2022 for residential and 2023 for commercial). It also
extended a production tax credit for wind projects through 2019.

Christine Harbin, director of federal affairs and strategic initiatives at Americans
for Prosperity, said her group wants these latest tax credits to expire because “this
is on top of some big expansions of similar hand-outs for these industries.”

Thomas A. Schatz, president of Citizens Against Government Waste, told Bloomberg BNA
that his group supports comprehensive tax reform, which would remove special breaks
for every industry and lower the corporate tax rates closer to what other industrialized
countries have.

Harbin called the U.S. tax code “woefully broken.”

“What is really important to talk about in the conversation about tax extenders is
that the very fact that Congress has to consider a package of expiring tax provisions
so close to the end of the year really highlights how broken our tax code is,”
she told Bloomberg BNA.

Book said more movement under a Trump administration is likely for broad tax reform.

“There’s momentum for it already, and better odds when Washington goes three ways
Republican,”
he said.

He said one of the problems with the current low energy prices is that lawmakers are
more likely to kill tax provisions that benefit energy. He said enough Republican
support probably exists for the production tax credit and investment tax credit aiding
the solar and wind industries, so he doesn’t anticipate them being cut out in tax
reform.

But with Trump planting “his flag firmly in the camp of the oil industries,” Book
said he thinks that future renewable tax credits may be at risk.

Diverse Coalition Backs Credits

A broad coalition of groups has come out in support of extending these energy tax
credits, including business groups, such as the Advanced Energy Economy, a business
trade group working to make energy clean and affordable, the National Association
of Home Builders, representing home builders and remodelers, and the American Farm
Bureau Federation, representing farmers and ranchers.

They also have gained support from the Distributed Wind Energy Association and utilities
such as the National Rural Electric Cooperative Association, which represents not-for-profit
electric cooperatives.

“The energy efficiency tax credits and deductions scheduled to expire at the end of
the year are an important suite of incentives for homeowners, builders and businesses
to make efficient investment decisions,” Ben Evans, vice president of communications
for the Alliance to Save Energy, an energy efficiency coalition of businesses, government,
environmental and consumer organizations, told Bloomberg BNA.

The National Rural Electric Cooperative Association particularly is supportive of
extending the geothermal heat pump tax credit so that it can be an alternative energy
option for its consumers, Kirk Johnson, the group’s senior vice president of government
relations, told Bloomberg BNA.

Johnson said the tax credit for geothermal heat pumps, which use heat from the Earth
to provide energy to warm and cool homes, involves high upfront installation costs.
But geothermal pumps can be more energy efficient than other centralized heat pump
systems over time, saving consumers money on their electricity bills.

If an owner wants to install a geothermal pump, “the tax credit often is the only
thing that enables that to make financial sense,” he said.

Legislative Pathway Forward

The groups in support of extending the tax credits are backing a bill introduced by
Rep. Tom Reed (R-N.Y.), H.R. 5167, which would extend the tax credits for these four
technologies for an additional five years, until Jan. 1, 2022. The bill has support
from 20 Republicans and 16 Democrats, as of Nov. 14.

Sen. Ron Wyden (D-Ore.), ranking member of the Senate Committee on Finance, has said
he supports extending these tax credits.

“Renewing clean energy tax breaks is a major priority for Sen. Wyden in the lame duck
session,” Ryan Carey, a senior adviser for policy communications on the committee,
told Bloomberg BNA.

If the tax credits aren’t extended this year, Congress still has the option to take
action next year to pass legislation that would retroactively credit those who install
these technologies.

Negative Impacts Already on Industry

But this retroactive fix isn’t good for these nascent industries, Marc Boom, associate
director of government affairs at the Natural Resources Defense Council, told Bloomberg
BNA.

“That probably doesn’t move the market, and certainly makes it very difficult for
businesses to plan to take advantage of it,” he said. He said making extensions now
allows people to plan and “it can actually drive the market forward.”

The National Rural Electric Cooperative Association’s Johnson said his group already
has seen its members stop installing geothermal heat pumps because of the uncertainty
of the tax credit expiring. Also, the National Association of Home Builders told Bloomberg
BNA that its membership stopped seeking to use the geothermal tax credit in June or
July since it takes so long to actually install the technologies and they don’t want
to build them if the credit doesn’t exist anymore.

Similarly, Ritter, with the Distributed Wind Energy Association, said small wind projects
take months to develop and put into place.

“So we’ve already seen severe economic impacts in these rural communities throughout
the country because of the policy uncertainty that the tax situation is presenting
to everybody,” Ritter said.

“If the Congress wants to make good policy and level the playing field, they have
to move on these credits,”
he added.

To contact the reporter on this story: Rebecca Kern in Washington at
rKern@bna.com

To contact the editor responsible for this story:
Larry Pearl at
lpearl@bna.com

All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to books@bna.com.

Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)

Notify me when updates are available (No standing order will be created).

This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to research@bna.com.

Put me on standing order

Notify me when new releases are available (no standing order will be created)